Email this article to a friend

The Basel Committee on Banking Supervision has published feedback from over 100 market participants, trade bodies and individuals to its proposals on strengthening bank regulation. Here, Financial News pulls out the main quotes from the biggest global banks.

The global standard setter for bank regulation today published feedback to its to its proposals on regulation, as set out in its consultation paper on strengthening the resilience of the banking sector. The closing date for feedback was Friday April 16.

"While each of the conservative elements within the proposal may have some merit in isolation, the cumulative impact of these initiatives will be deep and far-reaching. We do not believe the aggregate impact has been adequately explored and are concerned that the unintended consequences may be significant for credit availability, the cost of borrowing, employment and economic growth."

"The consultative document's definition of tier 1 capital is too narrow. As currently specific, the eligibility criteriA in the proposal will raise competitive equity issues for banking organisations located in the US."

"We support a globally consistent backstop leverage ratio as a component of pillar 1 in the interest of the stability of the sector and a level playing field across jursidictions."

"Barclays has strong reservations about introducing a leverage ratio...If a leverage ratio is introduced, we propose that regulators take it into consideration when undertaking the supervisory review under Pillar 2."

"There is no clarity as yet on what the target level of capital is for the new regime either at the system or individual bank level, other than it should be more than that held before the crisis."

"Given the other changes impacting banks, they may not be in a position to implement the committee's proposals when they come into force at the end of 2012 without restrictnig the flow of credit to the wider economy."

On the proposed leverage ratio - "This indicator has no clear objective and justification; furthermore it has proven failures or flawed definitions wherever it has been applied, in particular in the USA."

"Substantive capital and liquidity reform cannot be considered and implemented in isolation from other critical initiatives."

"We also believe that the proposals should include specific levels for the most relevant capital ratios, as well as more detail on the timing of the proposals as well as the appropriate sequencing of the proposals.

"We support the BCBS’s aim of making fundamental reforms where necessary to take account of the lessons learnt from the financial crisis, but we believe that many of the proposed measures have been calibrated far too severely."

"The proposals with regard to the leverage ratio are, in our view, inherently flawed for a diversified institution. The underlying purpose of a leverage test – safety – can be handled much better via liquidity and risk tests that address real underlying issues."

"We believe that, without significant recalibration, the proposals would have very undesirable consequences for cross border financial flows and the ability of banks to provide access to funding and risk mitigation instruments to the real economy."

"The current implementation timetable would require firms to vastly increase common equity in an extremely short period. This cannot be done through future profits alone and thus implies a material scaling back of existing business."

"In order to increase their capital levels, financial institutions will have to raise fresh capital from the markets. This will only be possible the sector remains attractive to investors. It is unrealistic to expect such significant capital raising to occur without a significant impact on lending, businesses and ultimately growth and employment."

• Goldman Sachs - Natacha Valla, from a European weekly analyst note

"Although they have been a long time in preparation, the timeline for implementation of the liquidity measures seems (overly?) ambitious, as the plan is to have the whole system up and running by the end of 2012."

• JP Morgan Chase - Adam Gilbert, managing director

"Based on JPMC research, the impact of current proposals could result in a sharp drop in global banks' return on equity from 13.3% to 5.4% in 2011, affecting both wholesale and retail banks. Under these conditions, it would be difficult to attract private capital, if necessary, to meet high regulatory standards and to fund growth. To maintain the same level of profitability, retail banking, commercial banking and investment banking) would have to increase by 33%."

"The proposals, as written, will likely make the financial system more fragile and further hamper an economic recovery. We believe there are four overarching issues with these proposals: risks are double counted, they lack risk sensitivity, require calibration and the timeline is unrealistic."

"Taking into account the possible wider impacts of the regulations as a whole on financial and capital markets as well as the real economy, it is too risky to finalise any new regulations in such a short time frame. There is a high likelihood that sufficient data cannot be obtained by impact assessment at this stage, since the proposed rules now contain considerable ambiguity."

"The cumulative and wider economic impacts of these proposals are not yet known. The scale and pace of the reforms present supervisors and bank with major challenges in assessing which specific measures will deliver the desired protection for tax-payers and what the trade offs will be for the wider economy."

"The capital proposals are more far-reaching than any initiative previously undertaken by the Basel Committee and less time is allocated toward their finalisation than in any previous initiative. We feel that the Committee is unlikely to be able to devote the time during 2010 to address every issue in proper depth. We believe this could lead to unintended consequences as a result of the implementation of the proposals."